May 25, 2005

I’ve been covering Internet stocks for more than five years and cannot remember a time when legal disputes and resolutions were having a greater impact on the industry and its companies. Perhaps this is indicative of a segment that’s becoming more stable and mature. Maybe the legal activity evidences the growing importance of intellectual property in the Net area, as companies increasingly employ it to establish and extend competitive advantages. We at S&P do think the Internet field is more crowded than it was a few years ago, and players are striving for proprietary differentiation.

The world’s largest Web companies and at least one equity analyst who covers them are taking notice. Today’s competition is taking place in the marketplace and in courtrooms. Corporate success for online businesses seems predicated on both good products and services and associated legal protections.

But as the medium develops and radio chains such as Infinity and ClearChannel Communications enter the field, podcasters who want to play brand-name content will face a copyright stumbling block. “It’s going to be extremely frustrating,” says Chris MacDonald, director of legal affairs for the Association of Music Podcasting, a group of Webcasters.

Why the conundrum? Simply put, copyright law hasn’t caught up to technology. While the music industry has created an efficient licensing system for music-streaming on the Web, which doesn’t entail making copies, it hasn’t cobbled together one for podcast-style music downloads.

PLAYING IT SAFE. And since podcasts enable listeners to download Web radio shows onto their iPods or other music players, the podcasters are violating copyrights if they don’t get permission from each recording label whose music they play. The one-off approvals add up to a big headache for small-time podcasters.

Later: Is it possible that MaryBeth Peters’ testimony raises questions about the consequences of overheated rhetoric in the copyright debate? What do you think about this?

IV. Not all Piracy is Alike

Before I conclude, Mr. Chairman, I would like to distinguish the type of piracy we see in the United States and what we see in many other countries. To be sure, piracy anywhere is serious and cause for concern. I have testified extensively on the very real dangers of domestic piracy, particularly the massive amount of piracy that dominates many peer-to-peer networks. As you know, these issues have given rise to the type of vigorous public debate on which the United States prides itself. But all too often, what we see abroad bears no resemblance to college students downloading their favorite songs and movies.

Much of the foreign piracy about which we are speaking today is done by for-profit, criminal syndicates. Factories throughout China, southeast Asia, Russia, and elsewhere are churning out millions of copies of copyrighted works, sometimes before they are even released by the right holders. These operations are almost certainly involved in other criminal activities. Several industry reports in recent years suggest that dueling pirate operations have carried out mob-style “hits” against their criminal competitors. And, although the information is sketchy at best, there have been a series of rumored ties between pirating operations and terrorist organizations.

What is problematic is that some American commentators who are prone to hyperbole about what they see as an imbalance in the U.S. Copyright Act are providing arguments and rationalizations that foreign governments use to defend their failure to address this type of organized crime. [...]

Maybe she’s got her own opinion about which side is causing the problem, but one has to wonder about the consequences of rhetorical overreach by the copyright cabal in the P2P debate (e.g., “downloading==theft/criminal acts”) when it comes to negotiating with governments about real piracy.

In the latest twist in the broadening battle overdecency standards, the glam-metal band Mötley Crüe filed suit against NBC yesterday. The suit states that the network violated the group’s free-speech rights and weakened its sales by banning it after Vince Neil, the lead singer, used an expletive on the air in a Dec. 31 appearance on “The Tonight Show.”

[...] The band’s case appears somewhat quixotic, given that federal courts have afforded wide discretion to broadcasters to choose their own content. But it does illustrate the uneasiness of the relations between entertainers and the media companies that provide a platform for their fame in the cautious climate that has surrounded programmers since CBS’s Super Bowl fiasco last year, when Janet Jackson’s right breast was exposed during a half-time performance in front of tens of millions of viewers. Last year the F.C.C. proposed fines of nearly $8 million against broadcasters, primarily for risqué material, and executives have spoken openly of practicing self-censorship to avoid the agency’s crosshairs.

[...] “I think it’s a publicity stunt,” Mr. Tobin said of the Mötley Crüe suit. “It can’t get NBC’s help to boost its album through the airwaves. So it’s going to try and do it by dragging NBC into court.”

But the band’s lawyer, Skip Miller, argues that there are lower-court opinions supporting the notion that a private entity, like a television network, acting under government pressure, can be liable for damages for violating free-speech rights. Mr. Miller added that NBC’s action unfairly singled out Mötley Crüe because NBC had not announced similar bans on other performers who have uttered profanities on its airwaves, including the singer Bono of U2, or the singer John Mayer.

Appellant first argues that he is entitled to a new trial because the district court erred in admitting irrelevant evidence of his internet usage and the existence of an encryption program on his computer. Rulings involving the relevancy of evidence are generally left to the sound discretion of the district court. State v. Swain, 269 N.W.2d 707, 714 (Minn. 1978). And rulings on relevancy will only be reversed when that discretion has been clearly abused. Johnson v. Washington County, 518 N.W.2d 594, 601 (Minn. 1994). “The party claiming error has the burden of showing both the error and the prejudice.” State v. Horning, 535 N.W.2d 296, 298 (Minn. 1995).

Appellant argues that his “internet use had nothing to do with the issues in this case;” “there was no evidence that there was anything encrypted on the computer;” and that he “was prejudiced because the court specifically used this evidence in its findings of fact and in reaching its verdict.” We are not persuaded by appellant’s arguments. The record shows that appellant took a large number of pictures of S.M. with a digital camera, and that he would upload those pictures onto his computer soon after taking them. We find that evidence of appellant’s internet use and the existence of an encryption program on his computer was at least somewhat relevant to the state’s case against him. See Minn. R. Evid. 401.

I would say that this is a somewhat less dire ruling than CNet would suggest. Yes, it’s a little troubling, but no more so (IMHO, and IANAL) that introducing the fact that a plaintiff owns any other tool — i.e., there’s a little overreaction here.

spite initial awe for Google’s project to digitize and make library books searchable online, some publishers are now criticizing the plan, calling it a “broad-sweeping violation of the Copyright Act.”

The Association of American University Presses, a 125-member nonprofit of scholarly publishers, made public this week a six-page letter sent to Google, whose Google Print for Libraries launched in December with the support of Harvard, Stanford and Michigan university libraries.

In the letter, the association posed a series of detailed questions to Google about the project and its scope, given that the company is making a copy of books still in copyright without explicit permission from each publisher, creating the potential for financial harm to its members.

“The fact is Google Print for Libraries appears to be built on a gigantic fair use claim, which we think is questionable at best,” said Peter Givler, executive director of the Association of American University Presses. “If the fair use is not valid, it could be a gigantic copyright violation. There are fundamental questions about copyright that need to be answered.”